The new self-employed worker contract will offer drivers a choice between being directly employed by DPD or working on a self-employed franchise basis.
Photograph: Alamy Stock Photo

The courier company DPD is to offer all of its drivers sick and holiday pay and will abolish its controversial £150 daily fines for missing work, as part of wholesale reforms to its gig-working model sparked by the death of a driver it charged for attending a medical appointment to treat his diabetes and who later collapsed.

The retailers raised concerns with the company over how it was treating couriers. Lane’s treatment caused anger in Westminster, with Labour describing it as “heartbreaking” and the business secretary, Greg Clark, labelling it “a terrible tragedy”.

DPD said on Monday it would offer its 6,000 couriers the right to be classed as eitherworkers, an interim status that includes paid holiday, sick pay and access to a pension scheme with the possibility to still be paid per delivery, as a fully-fledged employee or to remain a self-employed franchisee.

At present more than 5,000 of the drivers are self-employed and are paid per delivery but enjoy no employment rights.

Drivers who choose direct employment will be paid less per parcel delivered to offset the cost of paid holiday, sick pay and pensions.

Lane, 53, from Christchurch in Dorset, missed three appointments with specialists to treat kidney damage from his diabetes because he felt under pressure to cover his round and faced DPD’s £150 daily penalties if he did not find cover, his widow told the Guardian. He collapsed at the wheel of his van while on deliveries a few months before he died in January.

Responding to DPD’s announcement on Monday, Lane’s widow, Ruth, said: “It would have been lovely if it had been sooner. This won’t bring Don back. If this had happened a few years back I might not have lost him.”

Don Lane, who collapsed at the wheel of his van while making deliveries a few months before dying in January. Photograph: RichardCrease/BNPS

Dwain McDonald, chief executive of the company, which made £100m in profits last year, said: “We recognise that we need to improve the way we work with our drivers. While the self-employed franchise scheme has benefited thousands of drivers over the past 20 years, it hasn’t moved with the times and needs updating. Our plan is to completely transform our overall driver offer, as well as the day-to-day working relationship we have with our drivers.”

DPD is one of several courier companies that rely on armies of self-employed drivers. Others include Hermes, UK Mail and Yodel. It is the first to propose such fundamental reforms amid growing concern at the instability caused by the spread of the gig economy model in the UK, under which an estimated 1.1 million people are employed.

The Labour MP Frank Field, chair of the Commons select committee on work and pensions, said: “It is awful that it took the death of Don Lane to prompt DPD to make this move. But having now responded in this way, the company has set a totally new direction for every other company in the gig economy to follow. Banish worker exploitation from these shores, and halt the race to the bottom by both getting rid of punitive fines against sick workers and offering basic protections such as the national living wage, sick pay and holiday pay.

“The risks and rewards being generated by the gig economy must be shared more fairly between companies and their workers, many of whom comprise the vulnerable human underbelly of the labour market. The elimination of bogus self-employment, as DPD seems to be undertaking with these reforms, will have a key role to play in that rebalancing.”

DPD appointed David Watts, the former chair of the parliamentary Labour party, and Iain Wright, the former chair of the House of Commons business, energy and industrial strategy select committee, as external advisers on the reforms.

Thirty-six DPD drivers in Scotland have so far filed grievance cases, claiming they are owed annual leave from when they started delivering for the company, according to the GMB trade union.

“We have to wait and see what the pay rates will be before we decide whether this is a good deal,” said Cal Waterson, the regional organiser for GMB in Scotland.

The changes are expected to be introduced in July as part of a new driver code.